Domi Construction Pty Ltd v CNS Linings Pty Ltd
[2025] VSC 459
•18 July 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST
S ECI 2024 04973
BETWEEN:
| DOMI CONSTRUCTION PTY LTD (ACN 636 329 238) | Plaintiff |
| v | |
| CNS LININGS PTY LTD (ACN 164 346 123) & ORS (according to the attached Schedule) | Defendants |
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JUDGE: | Efthim AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 April 2025 and 2 July 2025 |
DATE OF JUDGMENT: | 18 July 2025 |
CASE MAY BE CITED AS: | Domi Construction Pty Ltd v CNS Linings Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2025] VSC 459 |
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BUILDING CONTRACTS – Building and Construction Industry Security of Payment Act 2002 (Vic) (‘the Act’) – Whether the Adjudication Determination should be set aside – Whether the payment claim meet the requirements of s 14(2) of the Act – Whether the payment claim was served within the time required by s 14 of the Act – Whether the s 18(2) notice was given within the time allowed by the Act – Whether the Adjudication Determination took into account excluded amounts and other matters – Whether there is denial of procedural fairness and apportionment to the plaintiff of the Adjudicator’s fee – Adjudicator erred in determining the reference date pursuant to s 9(2)(c) of the Act – The s 18(2) notice was not served within time allowed by the Act.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr J Wyatt, solicitor | Abrahams Meese Lawyers |
| For the Defendants | Mr A Blunt | Level Playing Field Lawyers Pty Ltd |
TABLE OF CONTENTS
Introduction
The Civil Procedure Act
Grounds of complaint
Ground 1 - The payment claim did not meet the requirements of s 14(2) of the Act.
Ground 2 – The payment claim was not served within the time required by s 14 of the Act
Ground 3 - The s 18(2) notice was not given within the time allowed by the Act.
Ground 4 - The Adjudication Determination took into account excluded amounts and other matters.
Ground 5 – Denial of procedural fairness and apportionment to the plaintiff of the adjudicator’s fee
Conclusion
HIS HONOUR:
Introduction
The plaintiff, Domi Construction Pty Ltd seeks judicial review of a $45,349.92 inclusive of GST determination (’the Adjudication Determination’) by the second defendant, Robert Douglas Riddell (‘the Adjudicator’) under the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘the Act’). The plaintiff is seeking an order in the nature of certiorari to quash the Adjudication Determination or, alternatively, an order in the nature of certiorari to quash all paragraphs of the Adjudication Determination pertaining to adjudication fees for breach of procedural fairness.
There are five grounds relied upon by the plaintiff:
(i)The payment claim is not a payment claim within the meaning of s 14(2) of the Act;
(ii)The payment claim was not served within the time required by s 14 of the Act;
(iii)The s 18(2) notice was not given within the time allowed by the Act;
(iv)The Adjudication Determination is void under s 23 of the Act, because the Adjudicator contravened s 23(2A)(a) of the Act in that he took into account non-claimable variations and excluded amounts; and
(v)The plaintiff was not afforded procedural fairness by the Adjudicator in apportioning to the plaintiff $24,750 of the Adjudicator’s fees to the plaintiff.
The Civil Procedure Act
Section 24 of the Civil Procedure Act 2010 (Vic) (‘Civil Procedure Act’) provides:
Overarching obligation to ensure costs are reasonable and proportionate
A person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to—
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
Here, the plaintiff has filed and served 40 pages of submissions in support of its application, the first defendant, CNS Linings Pty Ltd, has filed 18 pages of submissions in response and the plaintiff has filed 20 pages of submissions in reply.
The Court Book provided to the Court contains 1538 pages and the Book of Authorities contains 1304 pages. I doubt whether more than 50 pages of the Court Book were referred to in submissions.
I am concerned that there may have been breaches under the Civil Procedure Act. Counsel for the plaintiff conceded that there had been breaches of the Civil Procedure Act but was of the belief that none of those breaches were on the part of the plaintiff. The question of whether there have been breaches under the Civil Procedure Act and by whom is a matter that will be considered after the parties have an opportunity to file evidence and provide submissions to the Court when the question of costs is considered.
Grounds of complaint
Ground 1 - The payment claim did not meet the requirements of s 14(2) of the Act.
Section 14(2) of the Act provides that:
(2) A payment claim—
(a) must be in the relevant prescribed form (if any); and
(b) must contain the prescribed information (if any); and
(c)must identify the construction work or related goods and services to which the progress payment relates; and
(d)must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount ); and
(e)must state that it is made under this Act.
The plaintiff submits that the undeniable facts that the 19 June 2024 Spreadsheet printout is undated and does not cite a reference date are two among many indicia which together show that it is not a payment claim within the meaning of the Act. The plaintiff also submits that the authorities confirm that the existence of a valid reference date is an essential condition for the right to make a payment claim under the Act. The plaintiff has not referred me to any authority which confirms that the existence of a valid reference date must be contained in the payment claim.
The Adjudicator found that the Act does not require a payment claim to be dated or specify a reference date.[1] Section 14(2) is clear on a literal reading that there is no requirement that the payment claim must be dated, or that a reference date is to be cited or otherwise identified within it as a statutory precondition to the making of a valid payment claim under the Act.
[1]The Adjudication Determination at [89]-[90].
The plaintiff also asserts that s 14(2)(c) of the Act has been breached as the payment claim, the 19 June Spreadsheet fails to identify the construction work or related goods and services to which it relates or, alternatively, with the required specificity, including by failing to even identify when the work for which payment was claimed was allegedly done and when (if ever) payment for the work was first claimed.
The Adjudicator, when considering whether the payment claim failed to identify the construction work or related goods and services, stated:
In respect of the ground that the Payment Claim fails to identify the construction work or related goods and services to which it relates at all or, alternatively, with the required specificity, the Claimant submits that the Payment Claim sufficiently identifies the construction work, variations and services carried out, providing quantities and amounts for each item.
The Claimant points out that, in evaluating the sufficiency of the description of the items claimed in the Payment Claim, regard should be had to the background knowledge and prior exchanges between the parties. That is, it should be understood in the context of previous communications and the parties’ ongoing relationship.
It points out that the Payment Claim identifies the work performed and that each of the variations claimed states that the Payment Claim “is firmly grounded on the last Payment Schedule provided by DOMI in relation to Payment Claim 15”.
The Act’s specific requirements for a valid payment claim are set out in section 14(2). A reading of the Payment Claim states that it is in respect of “Woolworths & Dan Murphy Spotswood”. In respect of the Subcontract works, it plainly indicates that it is claiming the balance of the Subcontract value in respect of “T.F. Walls, Walls and Cladding” for Woolworths Spotswood and “Walls and Ceilings” for Dan Murphy Spotswood. It indicates the Subcontract value, the amount previously claimed and the amount claimed to date, identifying the amount claimed in the Payment Claim being the amount calculated by deducting the previous claim from the claim to date. It should be noted that in respect of the Subcontract works, the Claimant asserts they are 100% complete. There is no doubt from a reading of the Payment Claim that the Claimant claims the balance of the Subcontract value in respect of the items claimed.
The Payment Claim also includes claims for 4 variation items asserting that each is 100% complete. All of those variations have been the subject of previous claims, in respect of which the Respondent has previously assessed amounts as payable by it.
The Claimant now claims the balance of what is referred to in the Payment Claim as the “CONTRACT VALUE”.
There is a history of claims and payment schedules on the Project prior to the Payment Claim that indicates that the Respondent was quite familiar with the line items claimed in the Payment Claim and would have understood precisely that which was being claimed.
I am left in no doubt that the Respondent, upon reading the Payment Claim, will have been aware that the work claimed in the Payment Claim was the balance of the work to completion of the Subcontract work, together with the balance of the 6 variations partially paid by it following payment claim 15.
The degree of specificity in the Payment Claim in respect of the items claimed was sufficient for the Respondent to understand what was being claimed and to be in a position to identify any grounds upon which it might assert that it was liable to pay less than the amount claimed.
Accordingly, I find that the Payment Claim identifies the construction work or related goods and services to which it relates, with the requisite measure of specificity.[2]
[2]The Adjudication Determination at [79]-[88].
In John Beever (Aust) Pty Limited v Paper Australia Pty Ltd,[3] Lyons J summarised the relevant principles to take into account when applying s 14(2). His Honour said:
From my review of these authorities, many are of which are appellate authorities, the following principles are clear:
(1)the test of whether a claim is a payment claim for the purpose of the Act is objective;
(2)however, the manner in which compliance is tested is not overly demanding and should not be approached in an unduly technical manner or from an unduly critical point of view;
(3)for the purposes of the identification requirement, it is necessary that the payment claim reasonably identifies the construction work to which it relates such that the basis of the claim is reasonably comprehensible to the recipient party when considered objectively i.e. from the perspective of a reasonable party who is in the position of the recipient;
(4)in evaluating the sufficiency of the identification of the work, it is appropriate to take into account the background knowledge of the parties from their past dealings and prior exchanges of information including correspondence passing between them before and at the time of the payment claim. To that extent, the Court may go beyond the face of the document itself.[4]
[3][2019] VSC 126.
[4]Ibid [83].
In Protectavale Pty Ltd v K2K Pty Ltd,[5] Finkelstein J held that a test whether a document meets the requirements of s 14 is an objective one and it must be clear from the terms of the document that it contains the required information. His Honour said:
It is necessary to decide whether the invoice meets the requirements of s 14. The test is an objective one; that is, it must be clear from the terms of the document that it contains the required information: Walter Construction Group Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 at [82]. But the terms must be read in context. Payment claims are usually given and received by parties experienced in the building industry who are familiar with the particular construction contract, the history of the project and any issues which may have arisen between them regarding payment. Those matters are part of the context: Multiplex Constructions [2003] NSWSC 1140 at [76].[6]
[5][2008] FCA 1248.
[6]Ibid [10].
The first defendant submits that when considered objectively the payment claim identifies the relevant works to which the claim relates, with sufficient detail that would be reasonably comprehensible to the plaintiff. It says the plaintiff had knowledge of the defendant’s scope of works, the performance of those works, and retention monies withheld by the defendant under clause 15 of the Subcontract on the dealings between since formation.
In my view, the payment claim would convey to a reasonable person having the background knowledge at the time the document was served, that it is a payment claim when viewed objectively. The payment claim meets the statutory precondition. The Adjudicator was in a position to be able to make an appropriate adjudication.
The plaintiff also contends that the calculations contained in the 19 June Spreadsheet do not make any sense. The amount claimed in the 19 June Spreadsheet is $85,375.00 ex-GST. The calculation for the $85,375.00 is as follows:
Base claim to date Variations to date Paid to date Claim ex GST
$537,011 $202,694 $654,330 $85,375
In the 19 June Spreadsheet, the amount claimed prior to variations is $32,675 and there is a claim for variations of $26,313. The total of those two amounts is $58,988. There is no reference nor an explanation of what the amount of $26,387 (the difference between the $85,375 and the $58,988) relates to. The plaintiff submits that it is unclear on the face of the spreadsheet what items of construction work $26,387 is claimed in respect of.
Counsel for the defendant responded that this amount was retention monies to which the defendant was entitled. There is no reference in the 19 June Spreadsheet to the retention monies. The retention monies must, on my calculation, be $26,387 (the difference between the $85,375 and the $58,988).
In its reply submissions, the plaintiff states that clause 15 of the Subcontract states that the plaintiff may only retain as retention a maximum of 5% of the contract sum. The contract sum is explicitly stated in item 6 of the schedule to the Subcontract as $537,011; 5% of $537,011 is $26,850.55. The plaintiff believes that $32,675.00 is being claimed as retention monies. That is not the case. It appears that $26,387 is being claimed as retention monies, which is almost $500 less than the retention monies that the first defendant is entitled to claim under the contract.
There is an omission in the 19 June Spreadsheet, as there is no reference to retention monies and there may be an error as to the quantum of the retention monies.
The first defendant submits that a mere observation that there were errors in the claimed amount does not invalidate the payment claim.
In Façade Designs International Pty Ltd v Yuanda Vic Pty Ltd,[7] Riordan J stated:
[7][2020] VSC 570.
The undemanding standard for compliance with s 14(2)(c) is demonstrated by the following principles:
(a)A payment claim is only required to be bona fide and reasonably purport to identify the particular work in respect of which the claim is made.
(b)A payment claim is only a claim. It is unlike a payment schedule, which is intended to identify the scope of the dispute, and articulate the respondent’s case to be determined by the adjudicator.
(c)A payment claim is not required to be as precise or as particularised as a pleading. It need only provide sufficient detail to enable the respondent to identify the subject matter of the claim, not to make its own assessment of the amount payable.
(d)Evidence of what officers did in response to a payment claim is unhelpful and whether they were able to understand the payment claim in fact is not relevant, because ‘the focus must remain on the objective circumstances, not the subjective intentions or perceptions of one of the parties’.
(e)The fact that there may be typographical omissions or other errors does not invalidate a payment claim. As was said by the Full Federal Court in Pyneboard Pty Ltd v Trade Practices Commission:
[T]he mere fact that parsing and analysis in the artificial atmosphere of the courtroom can lead to the identification of a number of latent ambiguities will not invalidate what, as a matter of commonsense, is reasonably clear.
(f)To interpret the identification requirement under s 14(2)(c) as imposing a more exacting standard would encourage challenges to the validity of purported payment claims in the courts. The words of s 14(2)(c) do not mandate such an approach. I consider that a more exacting standard would not accord with the legislative intention. As Hodgson JA observed in Nepean Engineering, it cannot be consistent with the scheme of the Act for it to be construed as promoting:
[A] respondent [to] avoid the effect of the Act by not serving a payment schedule, and defending the [s 16] proceedings by raising a question as to identification, which could be as to just one of many items in a claim and could be such as to depend upon a very detailed examination of all the circumstances of the contract.[8]
[8]Ibid [38].
In my view, the omission of the retention monies in the spreadsheet, and the slight error in the calculation, does not invalidate the payment claim. It is clear what the first defendant is claiming.
The plaintiff also submits that the 19 June Spreadsheet is not a payment claim under the Act in respect of specific work done, but rather a statement of the first defendant’s position as to what it believed itself to be entitled at the end of the Subcontract.
The plaintiff states that the 19 June Spreadsheet was sent in the context of pre-litigation, final contract-settling discussions is confirmed by the events immediately after it was sent. This includes a reply sent to an email received by the plaintiff’s director and the lack of response from the first defendant.
That email sent by the plaintiff’s director states:
Hi Sue - we will triple check our end and maybe once we complete the assessment we can meet up and resolve. The numbers you have sent are different from we have previously discussed. We will endeavour to get back to you as soon as possible.
The plaintiff notes that Sue Catterall, Office Manager of the first defendant, did not reply to that email to object to how her correspondence had been regarded or to insist upon being provided with a payment schedule.
The plaintiff submits that the fact the 19 June Spreadsheet appears to claim the return of retention monies by apparently seeking the entire balance of the contract sum under the Subcontract, and also indicates that that document was a statement of the first defendant’s final position under the Subcontract rather than a payment claim under the Act because:
-the first defendant was aware that it had no contractual entitlement to call on the retention monies in June 2024, well before the 12-month defects liability period had expired; and
-the first defendant had two months earlier received from the plaintiff but declined to sign a deed of release which would have allowed the payment of retention of monies before they were due to be paid upon the first defendant’s contractual commitment to new obligations in relation to repair of any defects.
The plaintiff asserts that the 19 June Spreadsheet is not a claim for payment, but rather a statement of the first defendant’s position with regard of the final financial position of the Subcontract.
In Citi-Con (Vic) Pty Ltd v Trojan Built Pty Ltd,[9] Stynes J, in considering what was a final payment claim, stated:
[9][2020] VSC 557.
What is a final payment claim is not defined for the purpose of the SOP Act.
Whether a payment claim is a final payment claim is to be determined objectively. The Court should ascertain the meaning that the documentation would convey to a reasonable person having the background knowledge that should reasonably be ascribed to the parties at the time the document was served. The parties’ background knowledge is deemed to include experience in the building industry and a familiarity with specific construction project and any issues regarding payment.
The Subcontract provides for two types of payment claims:
(a) periodic progress claims described in cl 12.2; and
(b) final payment claim described in cl 12.4.
A precondition to a final payment claim under cl 12.4 is the expiry of the defects liability period. The timing of the defects liability period is governed by the terms of cl 11.7 and is said to extend for a period of 12 months commencing on the Date of Project Practical Completion.
The defects liability period has yet to expire. Consequently, cl 12.4 has not been engaged and service of a final payment claim under it would be premature.
Nevertheless, I am required to assess the character of the Payment Claim objectively and by reference to the meaning the documentation served would convey to a reasonable person at the time it was served.
I reject the plaintiff’s characterisation of the Payment Claim as a final payment claim.[10]
[10]Ibid [51]-[57].
The first defendant submits that applying the relevant, objective test set out by Stynes J, a reasonable person in the position of the parties at the time of the payment claim was made would have apprehended that the first defendant intended for the payment claim to be a payment claim under the Act. Even though Stynes J was considering what constitutes a final payment, in my view that test also applies to what constitutes a payment claim.
I note that the payment claim records on the bottom of the spreadsheet ‘this is a payment claim under the Building and Construction Industry Security of Payment Act 2002 (VIC).’ Also on 19 June 2024, Sue Catterall, Office Manager of the first defendant on behalf of the first defendant forwarded an email to the plaintiff and said ‘Attached is our amended claim for the above project…’.
The plaintiff submits that the 19 June Spreadsheet cannot be a payment claim as it includes excluded amounts. In support of its submission, the plaintiff refers to J.G. King Project Management Pty Ltd v Hunters Green Retirement Living Pty Ltd[11] where Niall JA (as his Honour then was) stated:
It is important to observe that the Act allows for the making of a final payment claim for construction work carried out under a construction contract. Subject to s 14(7), which deals with amounts that remain unpaid, once a final payment claim is served, no further payment claim can be served under the Act in respect of the construction contract to which the payment claim relates. It is tolerably clear that the purpose of the final payment claim is to give the builder the opportunity to claim, by way of a statutory entitlement, for all the work done under the construction contract. That is not the same thing as a final accounting of all the contractual entitlements going between the parties, a point that is revealed by the fact that a statutory claim, including a final claim, cannot include excluded amounts.[12]
[11][2024] VSCA 310.
[12]Ibid [57].
The first defendant noted that his Honour did not say that if a payment claim includes amounts that may reflect a ‘final accounting of all contractual entitlements going between the parties’ then the payment claim is not a payment claim.
I accept the first defendant’s submission that all his Honour was doing was differentiating between the types of things that cannot be included in the final payment claim under the Act, but may be available as part of a final accounting of entitlement under the relevant contract. The first defendant says it is clear that that claim was intended to be a payment claim and could only be understood as such. I agree.
The plaintiff has been unable to demonstrate any error made by the Adjudicator. I accept that the claim was intended to be a payment claim, and is a payment claim.
Ground 2 – The payment claim was not served within the time required by s 14 of the Act
Sections 14(4) and 14(5) of the Act provide:
(4)A payment claim in respect of a progress payment (other than a payment claim in respect of a progress payment that is a final, single or one-off payment) may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract in respect of the carrying out of the item of construction work or the supply of the item of related goods and services to which the claim relates; or
(b)the period of 3 months after the reference date referred to in section 9(2) that relates to that progress payment—whichever is the later.
(5)A payment claim in respect of a progress payment that is a final, single or one-off payment may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract; or
(b)if no such period applies, within 3 months after the reference date referred to in section 9(2) that relates to that progress payment.
The plaintiff submits that to the extent that the 19 June Spreadsheet was a payment claim within the meaning of the Act, the second defendant could not adjudicate upon it unless it was served on the plaintiff in accordance with either s 14(4) or s 14(5) of the Act.
The plaintiff also submits that if the 19 June Spreadsheet was a payment claim at all, it was a final payment claim within the meaning of the Act, and accordingly not served within the time period in which it should have been served pursuant to s 14(5) of the Act.
In support of its position, that the 19 June Spreadsheet was a final payment claim, the plaintiff relies on Protectavale Pty Ltd v K2K Pty Ltd,[13] where Finkelstein J said:
By s 9(2) progress payments are payable on and from the date, according to the terms of the contract, on which a claim for a progress payment may be made or the date by which the amount of the claim is to be calculated under the construction contract. Progress payments are effectively payments by instalments or periodic payments made over the life of the contract for construction work already completed. A final payment claim may be defined as a “final balancing of account between the contracting parties” (Jemzone (2002) 42 ACSR at 49) or “simply the last of the payment claims” (Southern Region Pty Ltd v State of Victoria (No 3) [2001] VSC 436 at [32]). In substance it is a claim for a payment which, when made, will discharge the principal from further obligations to pay money under the construction contract.[14]
[13][2008] FCA 1248.
[14]Ibid [17].
The first defendant submits that just because it had completed the works under the contract and had claimed 100% of the retention monies withheld by the plaintiff, the payment claim when considered objectively, was not a final, single or one-off payment claim as contended by the plaintiff.
The Adjudicator acknowledged that the plaintiff noted that the payment claim as a progress rather than a single and a final payment claim. The Adjudicator stated:
It also notes that Claimant submits that the DLP [defects liability period] runs “at best […] to November 2024” and more likely until the end of January 2025. The Respondent also does not take issue with that submission.
The Respondent correctly notes that the Claimant characterises the Payment Claim as a progress claim rather than a final, single or one-off payment but it asserts that the payment claim was “well out of time”.
It submits that, pursuant to section 14(4) of the Act, a payment claim can only be served within the period determined in accordance with the terms of the contract under which the work to which the claim relates, or 3 months after the reference date, whichever is the later.[15]
[15]The Adjudication Determination at [49]-[51].
The plaintiff did not note that the 19 June Spreadsheet is a progress claim as stated by the Adjudicator. The plaintiff in its submission to the Adjudicator stated:
In the CNS Submissions, CNS characterises the alleged 19 June 2024 payment claim as a progress claim rather than a final, single or one off-payment (CNS Submission§ 7.2, p. 7). Domi Construction does not sufficiently understand the CNS Spreadsheet Printout to be able to agree or disagree with that view, but notes that even if it were a progress payment claim, it would have been made well out of time.[16]
[16]The plaintiff’s written submissions to the Adjudicator at [24].
The first defendant submits that because the Subcontract does not otherwise provide, reference dates continued to arise under the Act because the plaintiff’s obligations under the Subcontract had not come to an end. It says the defects liability period was on foot and the first defendant may have been required to carry out additional works.
Clause 15.3 of the Subcontract provides:
The full value of Retention must be maintained during the term of this Agreement having regard to any right to recourse that the Head Contractor may exercise and shall be reduced by 50% within 14 days of Completion with the balance to be released (subject to any rights of the Head Contractor) upon the expiry of the Defects Liability Period and provision of all documents required under the Subcontract, including pursuant to clause 3.5.
The defects liability period is defined in clause 1.2 of the Subcontract as follows:
Defects Liability Period means a period of 12 months commencing from the last to occur of:
(a)the date the Head Contractor achieves 'Completion' under the Head Contract; and
(b)the date that the Site is handed over to the Client and or/the date the Client takes possession of the Site.
The parties and the Adjudicator accepted the completion date was in January 2024 and handover was at around the same time, meaning that the defects liability period concluded in January 2025.
In support of that submission the first defendant relies on Cat Protection Society v Arvio[17] where Digby J said:
This Contract does not, however, define or describe such a claim as a ‘final claim’, a ‘final payment claim’ or in any way refer expressly to a claim for final payment. Instead, under cls 24, 25.1(d), 26.5 and 28 of the Contract, after Practical Completion relevant entitlements may accrue to both the plaintiff and first defendant, including in relation to defective and incomplete work, and materials to which the first defendant has not attended.
. . .
The authorities indicate that the meaning of the payment claim is determined objectively. The Court should ascertain the meaning that the documentation would convey to a reasonable person having the background knowledge that should reasonably be ascribed to the parties at the time the document was served. The parties’ background knowledge is deemed to include experience in the building industry and a familiarity with the specific construction project and any issues regarding payment. [18]
[17][2018] VSC 757.
[18]Ibid [55], [61].
This supports that this claim may not be a final payment claim. However, this claim:
-includes a claim for return of retention monies;
-appears to claim the unpaid balance of the contract sum; and
-sought more than just work performed in the proceeding period.
The 19 June Spreadsheet also:
-cites all 20 variations in respect of work conducted in relation to the Subcontract apparently going back over a year;
-was sent more than seven months after the first defendant admits it had completed work under the Subcontract;
-was sent after practical completion of the underlying project;
-was sent in the context of discussions as to the final financial settlement between the plaintiff and the first defendant under the Subcontract and approximately two months after the parties had negotiated a final deed of release in relation to work performed under the Subcontract;
-was sent under cover of a different email, and took on completely different form to the 14 documents that the first defendant characterised in its affidavit material in this proceeding as (monthly or non-final) ‘progress claims’.
I note that:
-the defects liability period was on foot but has since ended without the first defendant making any further payment claim during that period;
-the rectification of defects carried out by the first defendant during the defect liability period was expressed to be carried out ‘at no cost to the Head Contractor’; and
-on 19 June 2024, there was no prospect of the first defendant making a further payment claim under the Act for work performed under the Subcontract.
Even though the defects liability period has not expired, it is still my view that the 19 June Spreadsheet was a final payment claim. In Citi-Con (Vic) Pty Ltd v Trojan Built Pty Ltd,[19] Stynes J stated that whether a payment claim is a final payment claim is to be determined objectively. Taking into account the above matters, in my view the payment claim is a final payment claim.
[19][2020] VSC 557.
As this was a final payment claim and no period is specified in the Subcontract for the final payment to be served, s 14(5)(b) of the Act applies. The payment claim must be served within three months after the reference date referred to in s 9(2) of the Act that relates to that progress payment as the Subcontract does not specify a date for service for final payment claims.
Section 9(2) of the Act provides:
Rights to progress payments
(2)In this section, “reference date”, in relation to a construction contract, means—
(a)a date determined by or in accordance with the terms of the contract as—
(i)a date on which a claim for a progress payment may be made; or
(ii)a date by reference to which the amount of a progress payment is to be calculated—
in relation to a specific item of construction work carried out or to be carried out or a specific item of related goods and services supplied or to be supplied under the contract; or
(b)subject to paragraphs (c) and (d), if the contract makes no express provision with respect to the matter, the date occurring 20 business days after the previous reference date or (in the case of the first reference date) the date occurring 20 business days after—
(i)construction work was first carried out under the contract; or
(ii)related goods and services were first supplied under the contract; or
(c)in the case of a single or one-off payment, if the contract makes no express provision with respect to the matter, the date immediately following the day that—
(i)construction work was last carried out under the contract; or
(ii)related goods and services were last supplied under the contract; or
(d)in the case of a final payment, if the contract makes no express provision with respect to the matter, the date immediately following—
(i)the expiry of any period provided in the contract for the rectification of defects or omissions in the construction work carried out under the contract or in related goods and services supplied under the contract, unless subparagraph (ii) applies; or
(ii)the issue under the contract of a certificate specifying the final amount payable under the contract a final certificate ; or
(iii)if neither subparagraph (i) nor subparagraph (ii) applies, the day that—
(A)construction work was last carried out under the contract; or
(B)related goods and services were last supplied under the contract.
The plaintiff submits that in circumstances where no final amount certificate was issued under the Subcontract, the reference date determined under s 9(2)(d) is either:
(a)per sub-section 9(2)(d)(i), the date immediately following the expiry of the defects liability period – i.e. a date in January 2025; or
(b)per sub-section 9(2)(d)(iii), the date after the day that construction work was last carried out under the Subcontract, which the first defendant has deposed in this proceeding as being 10 November 2023.
The plaintiff asserts that in either scenario, the 19 June Spreadsheet was not served pursuant to s 14(5)(b) within three months after the reference date as it was served on 19 June 2024.
I agree with the plaintiff this final payment claim was not served in accordance with the Act and the Adjudicator lacked jurisdiction.
If the 19 June Spreadsheet was not a final payment, but a progress claim, s 14(4) of the Act applies. The plaintiff submits that if that was the case, the progress payment claim was not served within the period required for service of such claims under the Act.
Pursuant to s 14(4) of the Act, service of a progress claim must be made within the later of the period determined in accordance with the contract; or within three months after the reference date determined by s 9(2) of the Act.
Clause 13.1 of the Subcontract provides:
Unless otherwise agreed in writing between the parties or as agreed and set out in the Scope Documents, and except for the month of December, the Subcontractor may claim payment progressively at the times identified in the Schedule for work carried out in the preceding month by issuing a written claim for payment to the Head Contractor (Progress Claim). Where the Works relate to works performed on Site, a Progress Claim must:
(a)be supported by evidence of the amount due to the Subcontractor and such information as the Head Contractor may reasonably require;
(b)set out the work and the value of work carried out by the Subcontractor in the performance of the Works to the date of the claim;
(c)set out the work and the value of work of any Variations;
(d)set out the amounts (otherwise due from the Head Contractor to the Subcontractor and the Subcontractor to the Head Contractor);
(e)set out the amounts previously paid by the Head Contractor to the Subcontractor in respect of the Works;
(f)set out the amounts previously claimed under this Subcontract;
(g)set out the retention moneys to be deducted pursuant to this Subcontract;
(h)set out the amount which the Subcontractor asserts is payable to the Subcontractor in accordance with this Subcontract;
(i)be accompanied by a statutory declaration prepared by an officer of the Subcontractor approved by the Head Contractor stating that:
(i)all moneys included in previous progress payments in respect of work carried out or materials supplied by subcontractors or suppliers to the Subcontractor or employees of the Subcontractor have been paid by the Subcontractor to those subcontractors, suppliers and employees; and
(ii)any other monies which are payable by the Subcontractor to its employees or subcontractors which have become payable as at the date of the statutory declaration have been paid where those monies relate to time spent on the Works by employees of the Subcontractor; and
(iii)be accompanied by all relevant documentation evidencing (to the satisfaction of the Head Contractor) the Subcontractor's full compliance with any industrial requirements or agreements.
In relation to the progress claim being served in accordance within the period determined in accordance with the Subcontract, clause 13.1 and item 14 of its schedule apply. Pursuant to item 14, claims for payment shall be made on the twenty-fifth day of each month. That, when read with clause 13.1, indicates that the first defendant was entitled to claim progress payments until the twenty-fifth day of the following month after the work was done.
The reference date is to be determined in accordance with the terms of the Subcontract, pursuant to section 9(2) of the Act. If the Subcontract makes no express provision with respect to the reference date, the reference date is determined pursuant to section 9(2)(b) of the Act.
The plaintiff submits that if the 19 June Spreadsheet is a progress claim, the reference date referred to in s 9(2) the Act for the purposes of determining the period in s 14(4)(b) falls to be determined pursuant to s 9(2)(a). The Adjudicator determined the reference date pursuant to s 9(2)(c) of the Act and therefore was in error.
In support of that submission, the plaintiff relies on Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd & Ors[20] where the High Court, when considering a provision equivalent to s 9(2) said:
From the preceding analysis of the Act, it follows that: the question whether the document served by Lewence on Southern Han on 4 December 2014 answered the description of a payment claim in s 13(1) turns on whether Lewence was on that date entitled under s 8(1) to a progress payment in relation to work carried out to 27 October 2014; and the question whether Lewence on that date had that entitlement under s 8(1) turns on whether a reference date under the Contract had then come to exist in relation to that work under s 8(2).[21]
[20][2016] HCA 52.
[21]Ibid [72].
The plaintiff submits that the Subcontract makes express provision for the date by which progress payments must be made in relation to specific items of work carried out under the Subcontract. It says the period referred to in s 14(4)(b) ends on a date four months after the reference date to be determined in respect of the items of work being claimed pursuant to s 9(2)(a) and thus the terms of the Subcontract in relation to when progress claims should be made.
The 19 June Spreadsheet fails to state when the items of work in respect of which the first defendant is claiming payment were allegedly carried out. The Adjudicator found that nothing was claimed in respect of work performed after November 2023.[22] Sue Catterall, Office Manager of the first defendant deposed that the work under the Subcontract was completed in November 2023.
[22]The Adjudication Determination [70].
Pursuant to clause 13.1 of the Subcontract, which required progress claims to be rendered by the twenty-fifth day of the month in respect of work items carried out in the preceding month, (or by 10 January 2024 in respect of work carried out in the month of November). The plaintiff submits that the period referred to in s 14(4)(b) of the Act for the items of work referred to in the 19 June Spreadsheet concluded well before 19 June 2024 and at the latest three months after the latest possible reference date of 10 January 2024, namely on 10 April 2024.
The plaintiff therefore submits that, if the 19 June Spreadsheet constitutes a progress payment claim, it was not sent in the period in which it had to be served pursuant to s 14(4) of the Act.
The first defendant submits that if the reference dates should have been calculated in accordance with clause 13.1 for the purposes of s 9(2) of the Act, as is contended by the plaintiff, the words ‘for work carried out in the preceding month’ in clause 13.1 do not operate to place a restriction on an entitlement to claim payment for work to a specific period.
The first defendant says the words ‘determined by or in accordance with the terms of the contract’ in s 9(2)(a) of the Act does not engage contract mechanisms determining what was due under the contract.
In support of this position, the first defendant relies on Plaza West Pty Ltd v Simon’s Earthworks (NSW) Pty Ltd & Anor[23] where Hodgson JA said:
I adhere to the view I expressed in Transgrid v Siemens Limited [2004] NSWCA 395, (2004) 61 NSWLR 521 at [35] and John Holland Pty Limited v Road and Traffic Authority of New South Wales [2007] NSWCA 19 at [38], to the effect that “calculated in accordance with the terms of the contract” in s 9(a) of the Building and Construction Industry Security of Payment Act 1999 (the Act) does not engage contract mechanisms determining what is due under the contract, independently of calculations referrable to the work performed.
This means that contractors are not deprived of entitlement to payment under the Act because a condition precedent, such as the obtaining of a superintendent’s certificate, has not been satisfied; and it means equally that contractors are not ipso facto entitled to payment because of the operation of a deeming provision such as cl 37(2) of the contract in this case.[24]
[23][2008] NSWCA 279.
[24]Ibid [53]-[54].
The first defendant also submits that limiting an entitlement to payment ‘for work carried out in the preceding month’ excludes, modifies or otherwise restricts the first defendant’s entitlement to payment in contravention of s 48 of the Act. The first defendant asserts that in those circumstances, those words would be void of operation.
Section 48 of the Act provides:
No contracting out
(1)The provisions of this Act have effect despite any provision to the contrary in any contract.
(2)A provision of any agreement, whether in writing or not –
(a)under which the operation of this Act is, or is purported to be, excluded, modified or restricted, or that has the effect of excluding, modifying or restricting the operation of this Act; or
(b)that may reasonably be construed as an attempt to deter a person from taking action under this Act—
is void.
Sections 14(8) and 14(9) of the Act provide:
(8)A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
(9)However, subsection (8) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim if the amount has not been paid.
The first defendant submits that s 14(9) of the Act does not prevent a claimant from including an amount that has been the subject of a previous payment claim if the amount has not been paid. If the plaintiff’s submissions were accepted s 14(9) could not be complied with.
I note that Plaza West Pty Ltd v Simon’s Earthworks (NSW) Pty Ltd[25] relates to a differently worded provision under the New South Wales Act. Clause 13.1 of the Subcontract does not limit an entitlement for payment under the Act but simply states the dates by which progress claims could be made under it.
[25][2008] NSWCA 279.
In my view a payment claim must be served under s 14(4) of the Act and can include an amount that has been the subject of a previous claim. Pursuant to s 14(9) of the Act a claimant could simply add to a payment claim an amount, the subject to a previous claim, that remains unpaid. The claimant cannot make the same claim on its own again as this would not be able to be served pursuant to s 14(4) of Act.
The Adjudicator determined the reference date, for the purpose of s 14(4)(a) of the Act, pursuant to s 9(2)(c) of the Act and in my view was in error as he should have determined it pursuant to s 9(2)(a) of the Act. The 19 June Spreadsheet should have been served well before 19 June 2024. The Adjudicator lacked jurisdiction.
Ground 3 - The s 18(2) notice was not given within the time allowed by the Act.
Section 18(2) of the Act provides:
Adjudication applications
…
(2)An adjudication application to which subsection (1)(b) applies cannot be made unless—
(a)the claimant has notified the respondent, within the period of 10 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim; and
(b)the respondent has been given an opportunity to provide a payment schedule to the claimant within 2 business days after receiving the claimant's notice.
The Adjudicator, in relation to the s 18(2) notice stated:
Initially, the Respondent did not serve a payment schedule in response to the Payment Claim.
Based on cl 13.2 of the Subcontract and s 15(4)(b) of the Act, the payment schedule was due by 3 July 2024, being 10 business days after the date the Payment Claim was served.
On 5 August 2024, the Claimant served on the Respondent a s 18(2) notice by email, by which it gave notice of its intention to proceed to adjudication and giving the Respondent a second chance to serve a payment schedule within two business days. I note that the s 18(2) notice has 1 August as the date printed on it, but the parties agree that it was served on 5 August 2024.
The Claimant’s s 18(2) notice was required to be served within 10 business days following the due date for payment.
The Claimant submits that the due date for payment is 31 July 2024. Section 12 of the Act provides that the due date for payment is the date on which payment becomes due in accordance with the terms of the contract or, if the contract makes no express provision with respect to the matter, within 10 business days after a payment claim is made.
Clause 13.3 of the Subcontract provides that the time for payment is the last business day of the subsequent month in which the payment claim was issued, which in this case is 31 July 2024, which accords with the Claimant’s submission.
Therefore, I am satisfied that the due date for payment is 31 July 2024 and that the s 18(2) notice was served within the period allowed under s 18(2)(a).
On 7 August 2024, the Respondent served its Payment Schedule, which was within 2 business days of the s 18(2) notice, within the period permitted under s 18(2)(b).
The plaintiff submits that the giving of requisite notice under s 18(2) of the Act is a precondition to the jurisdiction of the Adjudicator and the Court must determine for itself the question of whether the first defendant ‘notified the respondent, within the period of ten business days immediately following the date for payment, of the claimant’s intention to apply for adjudication of the payment claim’. A contravention of s 18(2)(a) of the Act would invalidate a subsequent adjudication application.[26]
[26]See Endeavour Constructions Pty Ltd v Down Under Piling Australia Pty Ltd [2023] VSC 424.
The 19 June Spreadsheet did not state a due date for payment. In relation to the due date for payment, s 12(1) of the Act provides:
Due date for payment
(1)A progress payment under a construction contract becomes due and payable—
(a)on the date on which the payment becomes due and payable in accordance with the terms of the contract; or
(b) if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment.
Clause 13.3 of the subcontract provides:
Subject to the Subcontractor issuing a valid tax invoice for the Certified Amount and the Subcontractor’s compliance with clause 3.5(a) and any other precondition set out in this Subcontract, the Head Contractor shall pay the Subcontractor the Certified Amount (Progress Payment) or the Subcontractor shall pay the Head Contractor the Certified Amount (as the case may be) on the last business day of the subsequent month in which the Progress Claim was issued.
The Adjudicator found that clause 13.3 of the Subcontract provides that the due date for payment is the last business day of the subsequent month in which the payment claim was issued which was in this case 31 July 2024. The s 18(2) notice that was served on 5 August 2024 was therefore within time.
The plaintiff submits that clause 13.3 of the Subcontract is explicitly made subject to the subcontractor issuing a valid tax invoice for the ‘certified amount’ and is only applicable to the payment of a certified amount.
I agree that clause 13.3 of the Subcontract does not make express provision as to the due date for the amount claimed on the 19 June Spreadsheet because the first defendant has not issued a valid tax invoice for a certified amount.
I note that in Raw Build v JBK Industries & Anor (No 3) (‘Raw Build’),[27] Vickery J found that:
-the subcontract in that case made no express provision for the due date for payment when no payment schedule was provided and the default position for determining the due date under s 12(1)(b) therefore applied;
-the adjudicator ignored the qualifying language contained in the relevant clause of the subcontract; and
-because section 18(2) was framed in ‘mandatory terms’ such that ‘an adjudication application cannot be made unless the requisite notice under s 18(2)(a) is given within the period of ten business days immediately following the due date for payment’, the adjudication determination was set aside.
[27][2017] VSC 766.
The first defendant states that Raw Build can be distinguished because it dealt with a different contractual regime. I do not agree. The principles applied by Vickery J are relevant to this matter before me.
In my view, as there was no certified amount within the meaning of the Subcontract, and the first defendant did not issue a valid tax invoice here, as in Raw Build, the absence of any amount shown in the payment schedule prevented the application of a clause of that Subcontract from extending a time payment period on the amount claimed to the end of the next month (31 July 2024).
Pursuant to s 12(1) of the Act, the s 18(2) notice had to be served by the first defendant within ten business days of 3 July 2024 which is on or before 17 July 2024. The s 18(2) notice was emailed to the plaintiff’s director on 5 August 2024.
Clause 13.2 of the Subcontract provides:
The Head Contractor shall, within 10 business days after receiving a Progress Claim, assess the claim and issue a progress certificate stating the moneys due to the Subcontractor or the Head Contractor as the case may be (Certified Amount) and details as to how the Certified Amount was calculated including reasons if the Certified Amount is different to the amount claimed.
The plaintiff elected not to assess the payment claim, or issue a progress certificate for such assessment to become the ‘Certified Amount’.
The first defendant submits that whether s 12(1)(a) or (b) applies in the circumstances of this case is a matter of construction based on orthodox principles.[28] In applying orthodox principles, a reasonable businessperson in the position of the parties at the time of the formation of the Subcontract would understand that if the plaintiff did not comply with its obligations under clause 13.2 of the Subcontract, then on the last day the plaintiff was obliged to assess the payment claim and issue a progress certificate, the amount claimed in the payment claim became the ‘Certified Amount’.
[28]See Mount Bruce Mining Pty Ltd v WrightProspecting Pty Ltd [2015] 256 CLR 104.
The first defendant says to construe clause 13.2 in the way the plaintiff has creates a commercial absurdity. It says that the plaintiff can avoid its payment obligations under clause 13.2 by simply refusing to assess and issue a progress certificate.
The first defendant also argues that the condition precedent to entitlement to payment (subject to the first defendant issuing a valid invoice for the certified amount) and compliance with cl 3.5(a)[29] and any other precondition set out in the Subcontract in clause 13.3 operates to either exclude, modify or otherwise restrict the first defendant’s entitlement to payment by a specified date under the Act in contravention of s 48 of the Act.
[29]Cl 3 (5) of the Subcontract provides:
The Subcontractor must:
(a)within 2 days of executing this Agreement, provide the Head Contractor with a duly executed Deed of Guarantee and Indemnity in the form provided at Annexure A of this Agreement, to be given by the Subcontractor's director; and
(b)as a condition precedent to Completion, provide the Head Contractor with a duly executed Deed of Collateral Warranty in the form provided at Annexure B of this Agreement.
In these circumstances, according to the first defendant, these condition precedents would be void of operation and would otherwise not deprive the first defendant from payment from a point in time.
The plaintiff submits that if clause 13.3 of the Subcontract is void as suggested by the first defendant, then the Subcontract makes no provision for a due date for the payment claim. The due date is therefore in accordance with s 12(1)(b) which is ten business days after a payment claim is made.
In my view there is nothing in cl 13.3 which purports to exclude, modify or restrict the operation of the Act. I also doubt whether only part of a clause can be excised pursuant to s 48 of the Act.
The Adjudicator made findings in accordance with clause 13.3 of the Subcontract and should have not done so. The payment demand was made on 19 June 2024. Pursuant to section 12(1)(b) of the Act, which applies here, the payment is due on 3 July 2024, being ten business days after it was served. The s 18(2) notice should have been served by 17 July 2024, being ten days following the due date for payment.
There is no need to apply s 48 of the Act, nor for the Subcontract to, in effect, be rewritten as is contended by the plaintiff. Here, the Adjudicator was in error and had no jurisdiction.
Ground 4 - The Adjudication Determination took into account excluded amounts and other matters.
Section 23(2A) of the Act provides:
(2A) In determining an adjudication application, the adjudicator must not take into account—
(a) any part of the claimed amount that is an excluded amount; or
(b)any other matter that is prohibited by this Act from being taken into account.
Pursuant to s 10 and s 10A of the Act, only claimable variations may be taken into account in calculating the amount of progress payment to which a person is entitled.
Pursuant to s 10B of the Act, any amount claimed that relates to a variation of the construction contract that is not a claimable variation is an excluded amount, and therefore must not be taken into account in calculating the amount of a progress payment to which a person is entitled under a construction contract.
In the Adjudication Determination, the Adjudicator:
-acknowledged that none of six variations in respect of which the first defendant claimed payments in the 19 June Spreadsheet printout were claimable variations; and
-stated that all amounts claimed that related to one of those variations were excluded amounts.
The plaintiff submits that when calculating the adjudicated amount, the Adjudicator appears to have taken into account the non-claimable variations and the excluded amounts claimed in relation to that figure.
The Adjudicator’s calculations of the adjudicated amount, is explained in Annexure A of the determination, which is attached to these reasons. The Adjudication Determination draws on the first defendant’s 19 June Spreadsheet. The plaintiff complains that instead of calculating the adjudicated amount, the Adjudicator arrives at it by working off that document.
There are 14 variations in Annexure A which claims were made for and these variations, according to Annexure A, total $202,694.00. The Adjudicator acknowledged that six variations in respect of which the defendant claimed payment has already been paid and were not pressed. Those variations claim payment of $26,138.00. The Adjudicator calculated the sum outstanding, including GST, as follows:
Amount Description
Annexure A spreadsheet reference
$ Amount
Contract value (ex GST)
D23
$537,011.00
plus
Total variations value claimed (ex GST)
F57
$202,694.00
minus
Total claimed amounts outstanding in respect of variations
I57
$26,313.00
Subtotal for amount due per Adjudicator
J64
$713,392.00
minus
“Paid to date” per First Defendant (and Adjudicator)
I65 & J65
$654,330.00
minus
Retention amount retained by Adjudicator
J67
$17,834.80
Subtotal (ex GST)
J68
$41,227.20
Total (incl GST of 10%)
J70
$45,349.92
The plaintiff has been unable to demonstrate any error in the calculation but says excluded amounts were contained in the calculation.
The first defendant submits that such error would be capable for correction under s 24(1) of the Act which states:
Correcting mistakes in determinations
(1)An adjudicator may correct a determination made by him or her if the determination contains—
(a) a clerical mistake; or
(b) an error arising from an accidental slip or omission; or
(c)a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination; or
(d) a defect of form.
I do not accept that the Adjudicator took into account non-claimable variations and excluded amounts but even if he did, there has been no error in the calculation. If there was an error, in my view, this would not be a jurisdictional error. I agree with the first defendant that it could be corrected.
Ground 5 – Denial of procedural fairness and apportionment to the plaintiff of the adjudicator’s fee
I do not have to consider this ground because I have found that there was jurisdictional error but I will provide my views in relation to this ground.
The plaintiff submits that the Adjudicator’s decision to apportion $24,750 of his fees to the plaintiff is void as there was a failure to accord procedural fairness to the plaintiff in respect of the decision as to the Adjudicator’s fees.
The plaintiff says that it was denied the opportunity to make submissions capable of affecting the adjudicator’s decision to apportion $24,750 in adjudicator’s fees to the plaintiff, by acts of omissions of the Adjudicator and the third defendant including:
-the third defendant’s (Adjudicate Today Pty Ltd letter) of 15 August 2024 that implied that less than $10,000 of Adjudicator’s fees would be levied in respect of the adjudication of a payment claim for $93,912.50 (including GST):
-That letter does not imply that less than $10,000 of Adjudicator’s fees would be levied. I have read that letter on numerous occasions and can find no reference to this.
-the third defendant’s failure to inform the plaintiff after appointing a NSW based adjudicator for a case raising jurisdictional issues under the Victorian Security of Payment Act, that the appointment of an adjudicator unfamiliar with the Act and those issues would potentially lead to an adjudicator’s fees being charged at more than two and a half times the normal fees for an adjudication of that magnitude:
-There is no evidence as to what an adjudicator would charge in a matter like this where submissions would be significantly greater than anyone would expect;
-The Adjudicator’s decision to accept the appointment under the Victorian Security of Payment Act and to spend a very large amount of time attempting to resolve jurisdictional issues under the Act which he was apparently not familiar with:
-There is no evidence before the Court that the Adjudicator was apparently not familiar with jurisdictional issues. I too have had to spend an inordinate amount of time trying to sort out the jurisdictional issues and consider the massive amount of material filed by the plaintiff;
-The Adjudicator’s decision to go ahead and apportion to the plaintiff the entirety of the time spent addressing the jurisdictional issues raised by the plaintiff and fees well in excess of the adjudication fees normally charged for such an adjudication:
- without first informing the parties that he needed to and had spent a large amount of time dealing with jurisdictional issues under the Act that he intended to charge for;
- without informing the parties that the adjudication fees that he would apportion in the Adjudication Determination were likely to greatly exceed the adjudication fees normally charged in respect of a sub $100,000 payment claim; and
- without affording the parties the opportunity to make submissions as to the apportionment of the Adjudicator’s fees in light of these facts:
There is no evidence that the plaintiff’s fees are well in excess of the adjudication fees normally charged. I suspect they might be due to the nature of the submissions put to the Adjudicator.
-The failure of the Adjudicator and/or the third defendant to serve the Adjudicator’s notice of acceptance on the plaintiff.
The plaintiff submits that he should have been given the right to make submissions as to the apportionment of the Adjudicator’s fee. Such submissions would have gone not only to the reasonableness of the Adjudicator’s fees, but also as to how they should apportioned if the first defendant obtained only part of the amount claimed in the 19 June Spreadsheet.
The plaintiff states that it was only afforded the opportunity to make submissions pertaining to the apportionment of Adjudicator’s fees once, on 22 August 2024, at a time when the plaintiff had no sense (and could not have foreseen) that it could possibly be apportioned adjudication fees in an amount near the $24,750 it was ultimately asked by the Adjudicator to pay.
The first defendant relies on Brambles Australia Ltd v Davenport,[30] Einstein J was dealing with natural justice in relation to costs. His Honour said:
The complaint is that the adjudicator determined that the respondent was liable to pay 100 percent of the adjudication fees without affording the parties [Brambles in particular] the opportunity to address on the issue. This is said to offend the rules of natural justice which it is said require in this context each party to be given the opportunity to present an informed case to the adjudicator to be considered. Brambles submission includes:
“While it may be that an adjudicator has a discretion as to how to award the costs of any determination, there is a presumption inbuilt into sections 28(4)(b) and 29(3) that those fees will be split equally – albeit the parties will remain jointly and severally liable to the adjudicator therefore – unless that adjudicator determines to the contrary. In the present case no submissions were made by any party, nor were they sought by the Adjudicator, to suggest a costs determination on any particular basis, let alone a 100% liability to Brambles.
An adjudication is amenable to review on the basis of a purported denial of natural justice; Musico at [107], Transgrid v Walter Construction Group Ltd [2004] NSWSC 21 at [60]ff. The Adjudicator’s approach to this issue meant that Brambles was denied a reasonable (indeed, any) opportunity of presenting a case on this matter; Russell v Duke of Norfolk [1949] 1 All ER 109 at 188 per Tucker LJ. The Adjudicator failed in the circumstances to adopt and follow a reasonable and fair procedure before exercising his statutory discretion, see for example (in a trial sense) Kioa v West (1985) 159 CLR 550 at 627 per Brennan J; Rose v Bridges (1997) 79 FCR 378 at 386 per Finn J. His Honour’s approach offended the notion of a contest or debate between parties before a detached and essentially passive tribunal, refer; Judicial Review of Administrative Action , Aronson & Dyer, LBC (2nd Ed) at 403.”
The content of the obligation to afford natural justice to the parties plainly depends upon the circumstances of the particular case and here, the legislative scheme. The parties are aware as soon as an adjudication application is served that the adjudicator has the power to determine the proportions in which the claimant and respondent are to be liable to contribute to the payment of the adjudicator’s fees and expenses. The legislation sets up a fast track tightly regulated set of procedures which, as earlier mentioned, have recently been the subject of extensive judicial consideration. The width of the discretion given to the adjudicator and the whole of the relevant legislative scheme, importantly, fixing a time limit within which the adjudication application is to be determined, appears to me to require that the parties, if they wish to put any particular matter to the adjudicator, do so in the course of and as part of their submission of the documents stipulated for by the Act: that is to say the payment claim, the payment schedule, the adjudication application and the adjudication response. In the absence of any submission of any type by either party in relation to the adjudicator's fees and expenses, the adjudicator may proceed to exercise, as here, his/her discretion to determine the issue. In that circumstance the adjudicator, in exercising that discretion, may take into account such matters as to the adjudicator appear relevant to the exercise. Whilst the discretion is not entirely at large, almost every matter which relates to the circumstances in which, and manner in which, the adjudication application has come forward and then been dealt with by the parties, may be taken into account.[31]
[30][2004] NSWSC 120.
[31]Ibid [57]-[58].
The plaintiff, in its written submissions to the Adjudicator on 22 August 2024, made submissions as to the Adjudicator’s fees. It submitted to the Adjudicator that those costs be borne 100% by the first defendant, and set out five reasons in support of that submission.
The plaintiff submits that it is irrelevant to this argument that the plaintiff had the opportunity to and did make submissions on 22 August 2024 as to how the Adjudicator’s fees in the ordinary range could be apportioned. It says at the time it had the opportunity to make the submissions, it had no way of knowing that such high and unreasonable Adjudicator’s fees would be levied and was entitled to assume that the quantum of those fees would be reasonable because of the legislative provisions requiring appropriately qualified adjudicators to be selected and only reasonable fees to be levied.
The plaintiff submits that this is what distinguishes the proceedings from the Brambles Australia Ltd v Davenport[32] on which the first defendant relies.
[32][2004] NSWSC 120.
I do not accept that that distinguishes that case. In my view, the principles continue to apply here. There is also no evidence before me to suggest that the Adjudicator’s fees were not reasonable, having regard to the work done and the expenses incurred by the Adjudicator. There has been no procedural unfairness here.
Conclusion
The Adjudication Determination must be set aside. Accordingly an order in the nature of certiorari will be made to quash the Adjudication Determination of the second defendant made on or about 5 September 2024.
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